Improving the return on your liquid assets

Improving the return on your liquid assets

In this week’s video insight, I discuss how investors can potentially improve the return on their liquid assets by incorporating private credit in their portfolios. 

Following the Reserve Bank of Australia’s (RBA) recent interest rate cut, Aura’s two private credit funds – the Aura Core Income Fund and the Aura Private Credit Income Fund – currently deliver higher yields when compared to traditional term deposits.

Through examples, I show how combining term deposits with Aura’s fund could potentially increase an investors overall return and enhance monthly income. 

Transcript: 

Hello, I am David Buckland, CEO at Montgomery Investment Management, and today I wanted to discuss how you can improve the return on your liquid assets. That said, I am not comparing the risk profile of bank’s term deposits with private credit loans.

The Reserve Bank of Australia (RBA) cut their official cash rate for the first time since 2020, on 19 February 2025, to 4.10 per cent. The major banks now offer 12-month term deposits at around 4.80 per cent, meaning that if you invested A$1.0 million today, you would receive an additional A$48,000 in 12 months’ time.

As many of you know, Montgomery Investment Management partnered with Aura Credit Holdings in mid-2022, and their two Private Credit offerings, the portfolios of the “retail” Aura Core Income Fund, and the “wholesale” Aura Private Credit Income Fund, have completely met our expectations. This has been reinforced with Aura Core Income Fund receiving an external rating of “AA” and Aura Private Credit Income Fund receiving an external rating of “BB”, at 31 January 2025. Obviously, the ratings of both portfolios are subject to change.

The Aura funds offer monthly income, careful loan selection and security, diversification and relatively short duration. They lend money to high quality borrowers, and do not lend money to physical developers involved in construction, or to companies in distress.

I believe using the Aura Credit Holdings products can boost the return on your liquid assets, however I reiterate that I am not comparing the risk profile of bank’s term Deposits with private credit loans. Let me illustrate.

Table 1: 60 per cent term deposit; 25 per cent Aura Core Income Fund; 15 per cent Aura Private Credit Income Fund

*12 month returns with a cash distribution, data to 28 February 2025. Past performance is not a reliable indicator of future performance.

The investor in table 1, based on the cash received from the two Aura products over the 12 months to February 2025, would have received a return of A$61,535 on their A$1.0 million investment. This is a blended interest rate of 6.15 per cent, and a A$13,535 or 28 per cent uplift on the 4.80 per cent interest from the term deposit, for an apparently small increase in the investor’s risk profile. Importantly, the investor now receives A$32,735 (or 53 per cent of the total A$61,535) monthly (rather than just at the end of the year).

Going up the risk curve a little further and changing the ratios to 50 per cent term deposit, 25 per cent Aura Core Income Fund and 25 per cent Aura Private Credit Income Fund, for example, would have increased the blended interest rate to 6.63 per cent, an A$18,275 or 38 per cent uplift on the 4.80 per cent interest from the term deposit. Importantly, the investor would now have received A$41,875 (or 63 per cent of the total A$66,275) monthly (rather than just at the end of the year).

I should declare my personal interest in both Aura products, and MIM’s interest in Aura Credit Holdings, the investment manager of the two Funds.

If you are interested in the Aura Private Credit products, please contact Rhodri Taylor or me, on 02-8046 5000.

That’s all I have time for this week, please continue to follow us on Facebook and X.

Thank you.

Disclaimer

You should read the relevant Product Disclosure Statement (PDS) or Information Memorandum (IM) before deciding to acquire any investment products.    

Past performance is not an indicator of future performance. Returns are not guaranteed and so the value of an investment may rise or fall.    

This information is provided by Montgomery Investment Management Pty Ltd (ACN 139 161 701 | AFSL 354564) (Montgomery) as authorised distributor of the Aura Core Income Fund (ARSN 658 462 652) (Fund). As authorised distributor, Montgomery is entitled to earn distribution fees paid by the investment manager and may be issued equity in the investment manager or entities associated with the investment manager.     

The Aura Core Income Fund (ARSN 658 462 652) (Fund) is issued by One Managed Investment Funds Limited (ACN 117 400 987 | AFSL 297042) (OMIFL) as responsible entity for the Fund. Aura Credit Holdings Pty Ltd (ACN 656 261 200) (ACH) is the investment manager of the Fund and operates as a Corporate Authorised Representative (CAR 1297296) of Aura Capital Pty Ltd (ACN 143 700 887 | AFSL 366230).     

You should obtain and carefully consider the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the Aura Core Income Fund before making any decision about whether to acquire or continue to hold an interest in the Fund. Applications for units in the Fund can only be made through the online application form. The PDS, TMD, continuous disclosure notices and relevant application form may be obtained from www.oneinvestment.com.au/auracoreincomefund or from Montgomery.    

The Aura Private Credit Income Fund is an unregistered managed investment scheme for wholesale clients only and is issued under an Information Memorandum by Aura Funds Management Pty Ltd (ABN 96 607 158 814, Authorised Representative No. 1233893 of Aura Capital Pty Ltd AFSL No. 366 230, ABN 48 143 700 887).    

Any financial product advice given is of a general nature only. The information has been provided without taking into account the investment objectives, financial situation or needs of any particular investor. Therefore, before acting on the information contained in this report you should seek professional advice and consider whether the information is appropriate in light of your objectives, financial situation and needs.      

Montgomery, ACH and OMIFL do not guarantee the performance of the Funds, the repayment of any capital or any rate of return. Investing in any financial product is subject to investment risk including possible loss. Past performance is not a reliable indicator of future performance. Information in this report may be based on information provided by third parties that may not have been verified.   

MORE BY DavidINVEST WITH MONTGOMERY

Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.